BOJ — Page 85

T-bill rates move up again

July 24, 2013 by IC Insider.com

Interest on Treasury bills rose again in the latest auction held on 24 July 2013. On offer were two instruments seeking to raise $400,000 each for 91 Days and the other of 182 Days duration. Both instruments were oversubscribed, unlike the auction in June when investors shun the longer dated issues.

In the July auction investors bid $700,977,500 for the 91 day issue and $ 513,898,400 for the 182 Days. The average rates came out at 7.995 percent for the 91 day bill this is up 64.5 basis points over the rate of 7.35 percent in the June auction. The 182 Days instrument came out at an average rate of 7.88 percent 76 basis points higher than the 7.12 percent average out turn in June. Investors however got rates ranging from 6.24999 to 7.84951 percent for the short date bill and 5.99999 to 8.74999 for the longer bill which were allotted in full. The rate reached as high as 7.995 percent for 24.2 percent of the allotment for the 91 day instrument and 9 percent for a very small portion of the 182 day t-bill.

Filed Under: Economy Tagged With: BOJ, GOJ, TBills, Trading Activity

Business inflation expectations

July 23, 2013 by IC Insider.com

A recent survey was conducted in May 2013 with 300 respondents showed that business sector expected inflation for the calendar year to be 10.3 percent, which is lower than the 10.6 percent they expected when the April 2013 survey was done. The expected inflation for calendar year 2013 was higher than the outturn of 8.0 per cent for 2012 and the annual point to-point inflation of 9.1 per cent as at May 2013.

In the latest survey respondents’ expectation of inflation 12 months ahead was down to 11.2 percent in the May 2013 survey from the 11.8 percent indicated in the April 2013 survey. Bank of Jamaica is saying that the expectation for lower inflation could have been indicative of the abatement in uncertainty surrounding the Government’s economic programme.

The central bank states that the Statistical Institute of Jamaica (STATIN) undertakes surveys of businesses on behalf of the Bank of Jamaica to ascertain the expectations about variables which are likely to have an impact on inflation in the near-term. In this regard, the survey captures the perception of Chief Executive Officers, Managing Directors and Financial Controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages and salaries. These responses assist the Central Bank in charting future policy decisions.

Filed Under: Economy Tagged With: BOJ, Economy, GOJ

Business sector expects rates to rise

July 23, 2013 by IC Insider.com

A survey conducted in May 2013 on behalf of Bank of Jamaica, soliciting the views of executives of the private sector showed that the business sector expects the 180-day T-bill rates to increase to 6.5 percent in the three months hence, up from the 5.4 per cent expressed in the previous survey. In the May 2013 auction, the actual interest rate for the 180-day Treasury bills increased to 6.44 per cent from 6.39 per cent in the April 2013 auction.

The majority of respondents expected that the Bank’s Open Market Operation (OMO) rate would remain the same over the next three months. This was similar to the views conveyed in the April and March 2013 surveys. The percentage of respondents that were of the view that the OMO rate would remain the same increased to 51.3 per cent from 43.0 per cent in the previous survey. The results from the overall survey about expectations for the OMO rate were largely corroborated by the views of respondents in the financial sector

The Statistical Institute of Jamaica (STATIN) undertakes surveys of businesses on behalf of the Bank of Jamaica to ascertain the expectations about variables which are likely to have an impact on inflation in the near-term. In this regard, the survey captures the perception of Chief Executive Officers, Managing Directors and Financial Controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages and salaries. These responses assist the Central Bank in charting future policy decisions.

Filed Under: Economy Tagged With: BOJ, GOJ, TBills

Improved business outlook

July 22, 2013 by IC Insider.com

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The perception of present and future business conditions in the most recent survey amongst Chief Executive Officers, Managing Directors and Financial Controllers found that the business community perception has improved relative to the previous survey in April. The survey was carried out by Statin on behalf of Bank of Jamaica in May and data was collected from 300 respondents.

Perceptions about future business conditions also improved for the second consecutive survey. The improvement in these perceptions was in contrast to the declining trend observed in both indicators since the December 2011 survey. “Of note, the improvement may be attributed to continued reduction in uncertainty about the Government’s economic programme” the central bank commented.

Operating Expenses | Respondents continued to indicate that they expect the largest increase in production costs in the next 12 months to reflect the higher cost for utilities. Other costs that were expected to contribute significantly to inflation in the next 12 months included stock replacement and fuel & transport costs. The cost of raw materials and wages & salaries were the input costs least expected to increase over the next 12 months.

The survey also covered a number of other areas in addition to business conditions.

Filed Under: Economy, Initial Public Offers, Stock Market Tagged With: BOJ, Economy

BOJ raises rates to attract money

July 10, 2013 by IC Insider.com

Bank of Jamaica, the country’s central bank, pushed up rates on its open market operations when it announced the latest series of CDs to mop up liquidity of Jamaican dollars.

At the last Treasury bill auction, investors sent a clear signal that they wanted higher rates to take on the risk of tying up their funds for more than three months. Will this move result in higher rates in the financial markets for the rest of the year? Some persons are of that view in light of the tight situation with the foreign exchange market. There is also the view that with the government pulling more revenues than originally projected and generating a smaller deficit than planned so far, the rest of the year could prove tight economically thus reducing demand in the country and by extension foreign currency.

According to a release from the bank, “To augment its liquidity management operations, the Bank of Jamaica will be offering two variable rate instruments commencing Tuesday, 09 July 2013 to Friday, 12 July 2013.”

The previous issue was priced at 6.99 percent for the 365 days instrument, 36 basis points lower than the current one.

The instruments on offer are:

A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices semi-annually at 0.23 percentage point above the six month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first six months is 7.35 per cent per annum.
An 18-month Certificate of Deposit, for an unlimited amount. The instrument re-prices semi-annually at 0.25 percentage point above the six month GOJ Treasury Bill rate existing at the start of each re-pricing period.

The initial coupon for the first six months is 7.37 per cent per annum. These offers are available directly to Primary Dealers and commercial banks. Other investors may access these instruments through a Primary Dealer. The term sheets for these Certificates of Deposit will be circulated via electronic mail to all Primary Dealers and commercial banks and will also be available on the Bank’s website at www.boj.org.jm

The bank says that it will continue to offer its regular 30-day Certificate of Deposit at the current interest rate of 5.75 per cent per annum.

The previous issues which were available between Monday, 01 July 2013 to Thursday, 04 July 2013 carried the following terms:

Variable Rate Certificate of Deposit 2013(D) which was originally issued on 12 June 2013 and is now being re-opened for a limited nominal amount of $2.0 billion. The tenor for the re-opened instrument is 164-days. This instrument maintains the original issue terms, viz, the initial coupon is 6.77 per cent per annum up to the first interest payment date on 12 September 2013 and re-prices quarterly at 0.15 percentage point above the three month GOJ Treasury Bill rate for the next interest payment date up to the maturity date on 12 December 2013.
A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices quarterly at 0.23 percentage point above the three month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first three months is 6.99 per cent per annum.

Filed Under: Economy Tagged With: BOJ, FX Market, GOJ, TBills

Gov’t raking in taxes

July 1, 2013 by IC Insider.com

Government is doing very well so far for this fiscal year. They collected a billion dollars more for the month of May, while the deficit for April came in less than $1.5 billion originally reported. The April deficit has now dropped to $884 million in the latest report from the Ministry of Finance.

The original deficit for April was projected at $3.5 billion making the actual out turn far better than planned as spending on interest cost was down amongst other areas of expenditure. The latest data released for May shows that revenues that were initially reported to be on par with budget when the April figures were first released is now up by $620 million more than planned. The April out turn for revenues is up by 11.7 percent and May is 13 percent up over intake for the same months last year.

The data for May show that taxes on local production & consumption climbed by a massive 19.44 percent or $1.75 billion above plan. However, the $1.2 billion increase in expenditure came from $1 billion more spent on interest payment, $400 million saved on wages and $600 million more spent on programmes.

The improved revenue in May was aided by a near billion dollar increase in special consumption tax on locally produced goods, improvement in motor vehicle license, accommodation, telephone taxes, $500 million improvement in local GCT, $300 million more each in stamp duty and travel taxes, offset by poorer performance in special consumption taxes for imports amounting to $540 million, $700 million drop in PAYE and $200 million in education tax. Company profit taxes performed better in April and May that budgeted.

The year-to-date deficit is provisionally put at $4.1 billion or $2.3 billion better than forecast.

Filed Under: Economy Tagged With: BOJ, Economy, GOJ

What’s BOJ up to in FX & money market?

July 1, 2013 by IC Insider.com

In Friday’s foreign exchange trading, authorised dealers bought much more foreign exchange than they sold and in a late after hours release, Jamaica’s central bank again decided to mop up more local funds from the financial system.

The timing of the release isn’t isolated from the developments in the foreign exchange market. It seems that the CD issue is linked to what the central bank may consider to be holding of a long position in US dollar by financial institutions. According to the release from the bank, the issues are “to augment its liquidity management operations, the Bank of Jamaica will be offering two variable rate instruments commencing Monday, 01 July 2013 to Thursday, 04 July 2013. The release comes against the back drop of the day’s trading when authorised dealers bought more than US$32 million and sold only US$24.5 million with the rate for the US dollar hardly trading.

The instruments being offered are:

Variable Rate Certificate of Deposit 2013(D) which was originally issued on 12 June 2013 and is now being re-opened for a limited nominal amount of $2.0 billion. The tenor for the re-opened instrument is 164-days. This instrument maintains the original issue terms, viz, the initial coupon is 6.77 per cent per annum up to the first interest payment date on 12 September 2013 and re-prices quarterly at 0.15 percentage point above the three month GOJ Treasury Bill rate for the next interest payment date up to the maturity date on 12 December 2013.
A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices quarterly at 0.23 percentage point above the three month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first three months is 6.99 per cent per annum.

These offers are extended to all Primary Dealers and commercial banks, from 01 July 2013 to 04 July 2013. The term sheets for these Certificates of Deposit will be circulated via electronic mail to all Primary Dealers and commercial banks.

The Bank says they will continue to offer its regular 30-day Certificate of Deposit at the current interest rate of 5.75 per cent per annum.

This is the third CD offering within a month and is in conflict with the view that the government wants the rate of the Jamaican dollar to fall as well as utterances from government’s spokesmen that the continuing devaluation is to ensure that the country has a competitive exchange rate. The measures are meant to tighten liquidity which means that there will be less Jamaican dollars available to purchase foreign exchange thus resulting in either stability in the exchange rate or a revaluation of the currency.

Read more about the BOJ’s intervention in the FX market, Market demand is not driving J$, BOJ is click here.

Filed Under: FX Market, Stock Market Tagged With: BOJ, FX Market, GOJ, TBills, Trading Activity

Long dated T-Bills snubbed as rates rise

June 19, 2013 by IC Insider.com

Investors snubbed the longer dated Treasury bills instruments as they stayed at the short end of the interest rate spectrum with an oversubscription for the 30-day Treasury bills but left unfilled the 3-month and 6-month instruments at today’s auction to raise $1.2 billion for the Government of Jamaica.
Treasury bills maturing Friday, 19 July 2013 attracted $499,693,300 for the $400,000,000 that was available and provided yields of 5.5 percent to a high of 7.534 percent with the average yield being 6.02245 percent to successful bidders.
The three month issue that matures on Friday, 20 September 2013 for $400,000,000 but only attracted $284,330,500 and provided yields of 5.5 percent to a high of 7.81356 percent, with the average yield being 6.75847 percent, representing an increase of nearly 15 basic points over the May issue.
The development today is in contrast to the May 24^th Treasury Bill auction when both the six months and three months’ issues were heavily oversubscribed twice over. The average yield for the three months was then 6.6197 percent with a range of 5.54998 to 6.68779.
The six month issue that matures Friday, 20 December 2013 was also for $400,000,000 but attracted just $201,628,400 but provided yields of 5.99999 percent to a high of 8.28964 percent with the average yield being 7.1203 percent, resulting in an increase in rates of 68 basic points.

The six months instrument yielded between 5.75 percent and 6.8799 percent with the average being 6.4437 percent in May.

Filed Under: Economy Tagged With: BOJ, Economy, GOJ, TBills

BOJ offers yet another instrument

June 17, 2013 by IC Insider.com

Fast on the heels of an issue of two local certificates of deposit that close on Tuesday, 18 June 2013, Jamaica’s central bank, the Bank of Jamaica, announces the offer of another special money market instrument commencing Thursday, 20 June 2013. The instrument, a 365-day US-Dollar Indexed Note due 2014 and is extended to all primary dealers and commercial banks.

The term sheet will be circulated via electronic mail to these institutions on Wednesday, 19 June 2013. A check with the BOJ did not disclose the terms of the issue other than what has been released but IC Insider gathers that the use of this instrument is to provide an alternative instrument for investment purposes without affecting the demand for foreign exchange. IC Insider can report that at least one big bank is rationing US dollars to $2,000 per day per person.

The central bank says in a release that it will continue to offer its regular 30-day Certificate of Deposit at the current interest rate of 5.75 per cent per annum. In addition, the current offers of variable rate Certificate of Deposits will remain open until Tuesday, 18 June 2013, as originally advised and will continue to monitor conditions in the financial markets and adjust its market operations to maintain stability.

Filed Under: Economy Tagged With: BOJ, Economy, FX Market

Market demand is not driving J$, BOJ is

June 14, 2013 by IC Insider.com

Over the last three weeks there has been more buying of foreign exchange by authorised dealers than selling, yet the Jamaican dollar has slipped in value. This is not the case of market forces determining the value of the currency, it is manipulation by the central bank to achieve a rate they are happy with. Take the case this week. So far, every day the buying of foreign exchange is more than the amount sold, yet the rates have slipped.

According to The Gleaner, the Governor of the central bank of Jamaica, Brian Wynter, while addressing journalists at a Jamaica House press briefing yesterday, said he understood the consternation of sections of the populace as the dollar eased past the J$100 to US$1 mark, but suggested that the dollar was finding its true value in a market-determined environment.

“We in Jamaica are operating a flexible exchange rate regime that is determined by the market and that is based on the principle that is determined by the market,” Wynter stressed.

Wynter signaled that he was unruffled as the movement of the local currency was consistent with the expectations of the Central Bank, operating under a flexible exchange rate regime, to which the Central Bank is committed. “The exchange falls within the boundary of the BOJ‘s forecast,” asserted Wynter.

We understand that the central bank can’t give an indication of what is its intention with regards the rate of the Jamaican dollar, but to say that the rate is being market determined seems like a big joke when one examines what is taking place.

To be fair, the Governor did give a clear indication. As reported in the Jamaica Observer, the Governor said, “If you have a strong exchange rate that benefits the consumer that is going to make it progressively harder for exporters to compete in overseas markets. If you go the other route and have a too weak dollar you will reverse that picture but also have too much inflation in the domestic economy,” he said. “We have to find the right balance and the programme we are operating within at the moment is built on a balance that will best provide the conditions for export-led growth,” he added.

In short, it is our conclusive opinion that the central bank is the one intervening to move the rate — not normal market forces.

The NIR is less than a billion at the end of May. One supposes that physiologically, building the NIR to over a billion dollars would be better ahead of the post-summer months when inflows are less and demand is higher.
Next, is the other strange thing happening in the FX market. Authorized foreign exchange dealers are selling more foreign exchange than they are buying for the past two weeks, which make no sense. Why would they be selling from their inventory if there is going to be much higher rates down the road? Why are they tying up Jamaican dollars at relatively low interest rates if the benefits to be obtained by interest earned will be eroded by a depreciated dollar? The central bank confirmed that the CD issue that ended on the 7th of this month resulted in tighter Jamaican dollar liquidity and that BOJ bought foreign currency from the dealers. In this sense, BOJ is fully aware of what is happening and is clearly trying to beef up the foreign currency reserves. The BOJ has quickly, as the previous CD issue closed, issued two more to pull more foreign exchange out of the system.

Yes, it is supply and demand that’s driving the rate. But the demand is one that is based on the BOJ encouraging the rate to move up by buying the banks surplus funds at higher and higher rates.

Talk back | Do you agree that the BOJ is influencing the demand side of the equation?